Prior to January 2000, the demand for money increased as people anticipated Y2K
problems. If the Fed had taken no action to offset this increase in money demand, then
nominal interest rates would have:
A. increased.
B. decreased.
C. remained constant.
D. fallen below real interest rates.
For a given inflation rate, if a rise in the stock market makes consumers more willing to
spend, then the ______ shifts _____.
A. aggregate demand curve; right
B. aggregate demand curve; left
C. aggregate supply curve; left
D. aggregate supply curve; right
Firms will hire additional workers as long as the wage:
A. is less than the marginal product of labor.
B. equals the marginal product of labor.
C. is greater than the marginal product of labor.
D. is less than the value of the marginal product of labor.
Which of the following is the most likely to be a variable factor of production at an
university?
A. The number of librarians.
B. The size of the football stadium.
C. The size of the student union.
D. The location of the university.
Bob’s Barber Shop cut 3,000 heads of hair in 2014and 3,100 in 2015. The price of a hair
cut was $7 in 2014and $8 in 2015. If 2014is the base year, what was Bob’s contribution
to real GDP in 2014?
A. $21,000
B. $21,700
C. $24,000
D. $24,800
Sydney sells snow globes from a cart. When the cart is located on the sidewalk near a
discount store, Sydney’s customers have reservation prices of $ When Sydney’s cart is
located on a sidewalk in an upscale mall, wealthier customers with reservation prices of
$10 buy snow globes. Assume that Sydney can sell the same volume at either location
and that marginal and average costs are $3 per globe at both locations. Information
about the reservation prices of Sydney’s customers increases total surplus by:
A. allowing consumers with different incomes to acquire things they value.
B. helping to ensure that snow globes go to consumers who like them most.
C. encouraging sellers to locate in underserved areas.
D. helping to ensure that snow globes go to consumers with the greatest willingness to
pay.
For a given domestic and foreign price level, an increase in the nominal exchange rate
______ the real exchange rate.
A. increases
B. decreases
C. may either increase or decrease
D. offsets any change in
The difference between the price of electronic equipment in a retail store and on the
Internet partly reflects:
A. the extent to which middlemen drive the price up for extra profit.
B. the lack of competition between brick and mortar stores and online stores.
C. the value of personal attention and support at a retail store.
D. excessive markup.
The following graph depicts demand.
At point D, demand is:
A. price inelastic.
B. price elastic.
C. unit elastic.
D. perfectly price elastic.
The substitution bias in the CPI arises because the CPI:
A. is based on a fixed basket of goods and services.
B. does not adequately allow for improvements in products.
C. measures prices at two different times.
D. understates the “true” rate of inflation.
Refer to the figure below. The equilibrium price in this market is ______ and the
equilibrium quantity is ______.
A. $25; 25
B. $25; 30
C. $30; 25
D. $30; 30
Based on the labor market diagram below, if the minimum wage is increased from $10
to $12 per hour, the numbered of unemployed workers will increase by ______
workers.
A. 5
B. 8
C. 13
D. 15
Federal Reserve actions that increase nominal interest rates and decrease the money
supply:
A. close a recessionary gap.
B. close an expansionary gap.
C. raise the rate of inflation.
D. raise bond prices.
Real GDP is measured in ______ prices; nominal GDP is measured in ______ prices.
A. current; base-year
B. base-year; current
C. current; current
D. base-year; base-year
To prevent inflation from becoming permanently higher following an adverse inflation
shock the Fed must ____, while to offset the effect of an increase in aggregate demand
the Fed must _____.
A. lower the inflation rate target; adjust the real interest rate target to the level at which
saving equals investment in the long run
B. raise the inflation rate target; adjust the real interest rate target to the level at which
saving equals investment in the long run
C. maintain the inflation rate target; maintain the real interest rate target
D. maintain the inflation rate target; adjust the real interest rate target to the level at
which saving equals investment in the long run
Which of the following is not classified as a final good?
A. New clothing purchased by a college student
B. Fresh vegetables purchased by a restaurant
C. A new car purchased by a family
D. A new machine purchased by a business
Miniville is an isolated town located on the southern shore of Lake Condescending, a
very large lake. The western edge of Miniville is adjacent to impassable mountains and
there are no towns or businesses for many miles to the east. The 300 residents of
Miniville are evenly distributed along 3 miles of shoreline on the lake, east of the
mountains. Lake Shore Drive, the only street in town, provides access to Miniville’s
homes and businesses. All residents live between the lake and the street; businesses
locate on the other side of the street. Lake Shore Drive is 3 miles long, and the points
labeled A, B, and C are 1, 2, and 3 miles from the western end of Lake Shore Drive,
respectively. All residents of Miniville shop at the store located closest to their homes.
If three stores were to open sequentially, you would expect that those stores would be
located:
A. at points A, B, and C.
B. halfway between the mountains and A, halfway between A and B, and halfway
between B and C.
C. in a cluster, nearest the mountains.
D. in a cluster, near the location chosen by the first store to locate.
If the public switches from using cash for most transactions to using checks instead,
then all else equal, the money supply will:
A. increase.
B. decrease.
C. not change.
D. either increase or decrease.
The payoff matrix below shows the daily profit for two firms, Row Restaurant and
Column Cafe, for two different strategies, publishing coupons in the student paper and
not publishing coupons in the student paper.
If Column Cafe publishes coupons and Row Restaurant does not, then Row Restaurant
will earn ______, and Column Cafe will earn ______.
A. $10; $200
B. $25; $25
C. $200; $10
D. $120; $120
Suppose that the share of population employed in Country B is 50 percent, and that
Countries B and C have the same real GDP per capita. Based on the information in the
table, what share of Country C’s population must be employed?
A. 5.0 percent
B. 20.0 percent
C. 40.0 percent
D. 50.0 percent
If the cross-price elasticity of demand between lettuce and salad dressing is negative,
then when the price of lettuce rises, the demand for salad dressing will ______.
A. increase
B. decrease
C. remain the same
D. become more inelastic
Suppose the market for shoes consists of three consumers. The table below shows the
quantity demanded at various prices for each consumer:
What is the market demand for shoes when the price is $50 a pair?
A. 7 pairs
B. 11 pairs
C. 15 pairs
D. It will depend on the quantity supplied when the price is $50 a pair.
Which of the following does not describe a characteristic of short-term economic
fluctuations?
A. Expansions and recessions are felt throughout the economy.
B. Expansions and recessions are irregular in length and severity.
C. The unemployment rate rises during recessions.
D. Durable-goods industries are less sensitive to short-term fluctuations than service
and non-durable industries.
When a U.S. oil company purchases oil from Saudi Arabia and the Saudi Arabian firm
uses the proceeds from the sale to buy transportation services from the U.S., U.S. net
exports ______ and the capital inflow to the United States ______.
A. are positive; is negative
B. are negative; is positive
C. are negative; is negative
D. are unchanged; is unchanged
Based on the following information, the value of the M1 measure of the money supply
is ______ and the value of the M2 measure of the money supply is ______.
A. $530 billion; $3,700 billion
B. $330 billion; $4,230 billion
C. $520 billion; $4,320 billion
D. $530 billion; $4,230 billion
Suppose the market for bottled water is served by two oligopolists. If they reach an
agreement to restrict production and charge a price above marginal cost, then:
A. they will earn a larger profit than a monopolist would have earned.
B. they will charge a higher price than a monopolist would have charged.
C. their agreement is likely to eventually collapse.
D. neither firm will have an incentive to cheat on the agreement since it benefits them
both.
If the cyclical rate of employment equals 1 percent and the actual rate of unemployment
equals 8 percent, then the natural rate of unemployment must equal:
A. -7 percent.
B. 9 percent.
C. 12.5 percent.
D. 7 percent.
Which of the following is NOT true of a demand curve?
A. It has negative slope.
B. It shows the amount consumers are willing and able to purchase at various prices,
holding other factors constant.
C. It relates the price of an item to the quantity demanded of that item.
D. It shows how an increase in price leads to an increase in quantity demanded of a
good.
If the market for sport utility vehicles has excess supply, then one can say that:
A. supply is greater than demand.
B. quantity supplied is greater than quantity demanded.
C. demand is greater than supply.
D. quantity demanded is greater than quantity supplied.
The Fisher effect is the tendency for ______ interest rates to be ______ when inflation
is high.
A. real; high
B. real; low
C. market; low
D. nominal; high
Josh pays $6,000 in taxes and earns $60,000. Maggie pays $4,000 in taxes. If the tax
system is progressive, then Maggie earns:
A. $40,000.
B. more than $40,000 but less than $60,000.
C. less than $40,000.
D. more than $60,000.
Suppose Chris is a potter who makes mugs. His total costs depend on the number of
mugs he makes each day, as shown in the table below.
When Chris produces 5 mugs per day, his average variable cost is ______.
A. $6
B. $8
C. $30
D. $40
Fred and Barney fill egg cartons with eggs. Fred just started the job and can fill only 20
cartons an hour. Barney has significant on-the-job experience and can fill 40 cartons an
hour. Both Fred and Barney work 40 hours a week. Fred’s average weekly productivity
is ______ cartons; Barney’s average weekly productivity is ______ cartons; and as a
team their average weekly productivity is ______ cartons.
A. 20; 40; 60
B. 20; 40; 30
C. 800; 2,000; 1,600
D. 800; 1,600; 1,200